Every November, as families here in Maine gather around the table, I find myself thinking about the things in life that grow slowly. A friendship built over decades. A family tradition handed down. And, since I've spent my career around investments, the quiet work of compounding.
What compounding really is
Compounding is simple to explain and hard to practice. When an investment earns a return and that return stays invested, it begins earning a return of its own. Over a few years, the effect is modest. Over a few decades, it can become one of the most powerful forces in a family's financial life.
The catch is that compounding rewards one thing above all else: time. It doesn't need brilliance or perfect timing. It needs patience.
The hardest part is leaving it alone
When I worked on the trading floor, I watched people work very hard to make money quickly. I also saw how often that urgency got in their way. The investors who build lasting wealth usually aren't the ones making the most moves. They're the ones who own good companies and give those companies the time to grow.
That's the approach we take. When we own a business, we want it to be one we'd be comfortable holding through good markets and difficult ones; well run, financially sound, with leadership that thinks long term. Then we let time do much of the work.
Wealth that outlasts you
Generational wealth isn't really about a number. It's about what that money makes possible for the people who come after you... an education, a first home, a cushion during a hard season, the freedom to make choices.
Patient investing is one of the most reliable ways to build toward that kind of legacy. Every year an investment is given room to grow is a gift to your future self, and often to your children and grandchildren too.
A few things worth being grateful for
Time. If you're early in your investing life, time is your greatest asset. If you're further along, the people you're building for may still have decades ahead of them.
Consistency. Regular contributions, even modest ones, give compounding more to work with.
A plan. Knowing why you own what you own makes it much easier to stay the course when the headlines get loud.
This Thanksgiving
As you gather with family this month, it may be worth a quiet moment to think about what you'd like to pass along: the values, and the resources that support them. If you'd like to talk about how your investments fit into that picture, we're always glad to set up a conversation, by phone or video, wherever you are.
From our family to yours, Happy Thanksgiving.
Jim Murphy
J. Murphy Asset Management